State-run oil Bharat Petroleum Corporation will invest Rs 100,000 crore in five years starting 2016 to expand across operations.State-run oil Bharat Petroleum Corporation will invest Rs 100,000 crore in five years starting 2016 to expand across operations. The company is in the process of changing its portfolio by increasing its upstream business and plans to leverage on its fuel retail network by using it for non-fuel retail business, Chairman and Managing Director S Varadarajan told ET. Edited excerpts:

What are your expansion plans?

We would have spent Rs 50,000 crore in the five years ending 2016 and aim to invest Rs 100,000 crore on capital expenditure in 2016-2021. Of this, Rs 20,000-25,000 crore will be on upstream business to develop assets in Mozambique and Brazil, Rs 30,000-35,000 crore on refinery expansion. The refinery expansion would be mainly at Bina and also Numaligarh if we get capital subsidy for the latter, essentially to cater to central and north India. We would spend another Rs 10,000 crore on marketing infrastructure and pipelines. We will upgrade our network, retail outlets, coastal terminal for Rs 15,000-20,000 crore.

How will the revenue mix change when the upstream business kicks off?

The upstream business will start generating revenues by 2020. In another 10 years from now, our upstream revenue would compete with our downstream revenue.

The Kochi refinery is seen as a game changer for you. How is it coming up and what are the margin expected from it?

We have completed 87 per cent of work at Kochi and will start the commissioning activity by May 2016. At the current rates, the refinery will be making margin of $9 a barrel. There are options to expand and we will look at it. We can transport the output through the coast to eastern India where the demand is huge.

What is the expansion plan for Bina refinery? Are you looking at investors for it?

We plan to increase the output at Bina from 8 million tonne to 15 million. Bina refinery’s equity structure provides for 49 per cent ownership by us, 26 per cent by Oman and the rest 24 per cent can come through strategic partner, multinational company, or through public issue. Due to the initial losses we have not gone public yet. When the project reaches a substantial size next year, we will induct an investor who would also be a partner for the next phase of expansion.

Given the fall in crude prices, would you have to write-off investments made in overseas assets? Would you look at more acquisitions since valuations are cheap?

We acquired assets at early exploration stage and there’s no question of writing-off, but fresh investments in these assets will be done after considering the revenue potential. We could make more acquisitions abroad if the price is right. We are evaluating proposals of early exploration stage projects in Africa and the Americas.

Given the steep fall in crude prices, do you anticipate more inventory losses?

Reports suggest crude prices would be benign in 2016 between $50-60 a barrel. If it ranges in that band we won’t have too many issues. There would be some correction in our second quarter FY16 results but for the full year there would be recovery.

What is the next most exciting thing for BPCL?

We want to look beyond fuels by setting up non-fuel retail outlets across our network, especially in rural areas. Our ‘In and Out’ retail stores have annual revenues of Rs 10,000 crore and we are experimenting with options to roll out a plan in six months. Non-fuel retail revolution is waiting to happen.

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